Bankruptcy and Consumer Proposal Rate in Canada Increases
August 30th, 2010 by A Licensed Insolvency Trustee
Personal bankruptcy filings in Canada increased in June, 2010, according to personal bankruptcy statistics released by the Office of the Superintendent of Bankruptcy. In the month of June 11,900 Canadians filed a bankruptcy or a proposal, up 7% from the 11,123 filings in May, 2010. Over the twelve months ending in June, 145,233 residents of Canada filed a proposal or bankruptcy, up 6.2% from the 136,749 who filed over the twelve months ending in June, 2009.
For the twelve months ended June 2010 the rate of filings increased everywhere but in Manitoba and Nunavut. Here’s a summary of the rate of increase in personal insolvencies (which includes bankruptcies and proposals) filed by consumers in Canada for the twelve months ended June, 2010:
- Bankruptcy in Newfoundland & Labrador up 4.3%
- Bankruptcy in Prince Edward Island up 7.9%
- Bankruptcy in Nova Scotia up 10.6%
- Bankruptcy in New Brunswick up 12%
- Bankruptcy in Quebec up 2.7%
- Bankruptcy in Ontario up 4.3% (and consumer proposals in Ontario increased by 29.3%)
- Bankruptcy in Manitoba down 0.7%
- Bankruptcy in Saskatchewan up 11.4%
- Bankruptcy in Alberta up 18.4%
- Bankruptcy in British Columbia up 15%
- Northwest Territories up 28.2%
- Yukon up 28.6%
- Nunavut down 60% (there were 10 filers in 2009, and only 4 in 2010, so although the percentage drop is large, the absolute numbers are not large).
- Bankruptcy in Canada up 6.2%
What does the increase in insolvency filings in Canada mean for the average Canadian?
A quick review of the number shows that in virtually every province the number of insolvencies filed increased, but a more detailed look at the number reveals a very important trend: personal bankruptcy filings in Canada are actually decreasing, while the number of consumer proposals filed is increasing dramatically.
As noted above, over the last twelve months in Canada the total number of residents of Canada declaring insolvency increased by 6.2%, to 145,233. However, the number of personal bankruptcies actually decreased by 1.5%, from 106,933 to 105,360. So why are total filings up 6.2%? Because the number of proposals filed by consumers increased by an astounding 33.7%, from 29,816 to 39,873 filings in the last twelve months.
These numbers prove that the average Canadian is increasingly choosing to file a consumer proposal as an alternative to personal bankruptcy.
Why are consumer proposal filings increasing in Canada?
Bankruptcy numbers are falling, and consumer proposals are increasing for two reasons:
First, the economy in Canada is still showing weakness, which is why overall numbers are still increasing.
Second, and most importantly, in September 2009 the federal government implemented new bankruptcy rules that make filing bankruptcy a longer and more expensive process for many Canadians. The most significant new rule involves the calculation of surplus income. In simple terms, under the new surplus income and bankruptcy in Canada rules, if your family income is higher than the allowable limit set by the government, your bankruptcy will last for an extra year, and you will be required to make extra payments for that extra year. That means that a first time bankrupt, instead of being discharged in nine months, may not be discharged for 21 months.
Clearly, many Canadians with debt problems have analyzed their options, and have decided that a consumer proposal is a better option than bankruptcy for dealing with their debts, and that’s why consumer proposal numbers continue to increase.
With a consumer proposal you make one fixed monthly payment, and that payment doesn’t increase even if your income increases. You know exactly what you are required to pay to discharge your debts, and that’s a great feeling.
To find out if a consumer proposal is right for you, contact a licensed consumer proposal administrator today for a no charge initial consultation. The numbers don’t lie; a consumer proposal may be the right option for you.